What is a retention bond?

What is a retention bond A retention bond is also known as a ? retention bond,? Warranty bond,? Retainer bond,? Retention bond or? Tail payment guarantee, refers to the exporter or contractor to the bank to apply for the issuance of the importer or the project owner as the beneficiary of the letter of guarantee, to ensure that in advance after the recovery of the final payment, if the seller to provide goods or contracted works do not meet the quality standards specified in the contract, the exporter or contractor will be part of the retention of money returned to the importer or the project owner. Otherwise, the guaranteeing bank will pay compensation. In foreign project contracting, the project owner usually retains 5-10% of the project payment as retention money, which is paid to the contractor when the warranty period of the project expires without defects. If the contractor needs the owner to pay the full amount without withholding the retention money, he should submit a letter of guarantee for the retention money issued by the bank, which guarantees that the bank is responsible for returning the retention money at the end of the warranty period of the project if it receives a written notice from the owner that the project is defective. The key points in the audit of the retention bond There are three key points in the audit of the engineering warranty bond: 1. The validity of the warranty bond should be subject to the payment of the final payment as a prerequisite. That is to say, the owner pays 5% of the final payment, the contractor will deliver 5% of the warranty bond; the owner pays 10% of the final payment, the contractor will deliver 10% of the warranty bond. Should be avoided in the case of the owner has not yet delivered the final payment, the contractor's warranty bond but in advance of the provisions of the effective date. 2, the warranty bond amount should not exceed the amount of the final payment of the project, usually 5% or 10% of the contract price, not more than 10%. 3. The warranty bond should expire no later than the date of issuance of the final acceptance certificate. In order to avoid the owner of the indefinite postponement of the issuance of the final acceptance of the certificate, can also strive to provide:? This warranty bond in the elimination of the date of completion of the project or the date of issuance of the final acceptance of the certificate of expiration, whichever occurs earlier, but in any case not later than? In any event, not later than Month? In any event, no later than?